Georgia: Georgia updates tax legislation

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The government of Georgia is attempting to simplify the
country's tax code after Georgia signed its association
agreement (AA) deal with the EU in mid-2014. While major tax
reforms regarding corporate income tax took place in 2017,
Georgia continues to modify and update its tax system, bringing
several updates into force at the beginning 2018.

VAT returns

Georgia has further improved its tax legislation by
introducing an automatic system of value-added tax (VAT)
returns starting from January 15. The state expects that the
new system will result in additional surplus capital for the
country.

Using a special system, entrepreneurs are able to pay VAT
returns in five to seven business days by filling out an
electronic application without any additional paperwork.
Following the Estonian taxation model, VAT refunds will be
issued if there is a surplus of VAT input over output, which is
very beneficial for small and medium businesses with deficits
in cash and limited working capital.

Vehicle property tax

The payment of property tax on automobiles will start for
families with an annual income of more than GEL 40,000
($16,300) in 2018. Families with an annual income of between
GEL 40,000 and GEL 100,000 will have to pay between 0.02% and
0.05% of the vehicle cost. Families with an annual income of
over GEL 100,000 will be paying between 0.8% and 1% of the
vehicle cost.

Exemptions from personal income tax

Exemptions apply to the following cases:

Taxable income from the original delivery
of an agricultural item produced in Georgia by a person hired
in the field of agricultural production, and for the salary
paid to the person employed in this production, if the gross
income from this supply or the gross income of the employer
from this supply does not exceed GEL 200,000 for the
reporting period.

Income received from the transferring of
shares or securities issued in Georgia by a resident legal
entity and recognised by the Georgian national bank as
securities for which trading on an organised market is
allowed.

Exemptions are in force from January 1 2018 and valid for
the next five years.

The updates in the tax code are aimed at improving the
investment climate, attracting more investors and increasing
the capital in the country. We advise clients receiving revenue
financial instruments that fulfil the above criteria to seek
advice on whether they may benefit from tax exemptions and to
ensure their VAT return filing practices are compliant with the
new approach.